The 83-year-old media mogul's audacious $80-billion bid to acquire Time Warner was rejected, but people close to Murdoch say that he hasn't given up. Time Warner's stock soared 17% on Wednesday amid news of the overture, nearly reaching the offer price of $85 a share.

"Ultimately they will raise their bid to try to get the deal done," media analyst Michael Nathanson said.

What's driving Murdoch is the rapid consolidation of pay television distributors, analysts say. The nation's largest cable operator, Comcast Corp., is in the process of acquiring Time Warner Cable. AT&T is buying satellite broadcaster DirecTV.

As distributors team up, content providers such as Time Warner, CBS, Discovery, Viacom and Murdoch's 21st Century Fox fear they will lose leverage in negotiation fees for carriage of their channels. They also want to fortify their holdings to guard against incursions by influential technology companies, such as Google Inc. and Netflix.

Time Warner's board rejected the overture, but the offer drove Time Warner stock up 16% to $82.53 in early trading on the New York Stock Exchange...

(Ryan Faughnder)

"We're in an arms race," Gene Kimmelman, a former top Justice Department lawyer, who now leads media watchdog group Public Knowledge, told a Senate Commerce Committee hearing Wednesday. "Transmission companies bulk up, and then, no surprise, content companies want to bulk up."

But the result may not be good for consumers struggling to pay rising video and broadband bills.

"They are caught between a rock and hard place," Kimmelman told Congress, adding that "there is no competition there to lower prices to consumers."

Murdoch and his team also see a unique opportunity to create an entertainment juggernaut by combining two of Hollywood's biggest film and TV studios — 20th Century Fox and Warner Bros. It would become the dominant producer of movies and TV shows.

Time Warner has rejected a takeover bid worth about $76 billion from Rupert Murdoch's Twenty-First Century Fox.

Time Warner has rejected a takeover bid worth about $76 billion from Rupert Murdoch's Twenty-First Century Fox.

Time Warner is the parent of HBO, CNN and Warner Bros. Murdoch controls Fox News Channel, the Fox broadcast network and the 20th Century Fox television and film studios. He also controls the Wall Street Journal through his publishing company, News Corp.

The combination would make Fox an even bigger player in TV sports. Fox has two national cable sports channels, a raft of regional sports networks with rights to the Angels and Clippers. Time Warner's Turner networks televise post-season baseball and professional and college basketball games. Combining the two would allow Fox to compete more aggressively against Walt Disney Co.'s ESPN.

The potential deal would have enormous ramifications to Los Angeles' entertainment economy, which is already reeling from the loss of film production to states that offer lucrative tax credits. The proposed union could result in hundreds of layoffs through the elimination of overlapping jobs.

A pairing of 21st Century Fox and Time Warner would face intense regulatory scrutiny even though no Federal Communications Commission rules would automatically derail it.

One obstacle might be the idea of the nation's two biggest cable news outlets under one roof, and Fox has already indicated that it would sell CNN to make the deal more palatable.

Also, the sheer volume of content and networks that a combined 21st Century Fox and Time Warner would own and the power that would give them over the production community would raise serious antitrust issues.

"The increased buying power 21st Century Fox would have is a huge antitrust issue I would expect the Justice Department to look at," Derek Turner, research director of Free Press, said of a potential union of the two companies.

Chase Carey, one of Murdoch's top lieutenants and chief operating officer of 21st Century Fox, made the initial approach. Carey met with Time Warner Chief Executive Jeff Bewkes for lunch in New York on June 9 and made the proposal. Bewkes told Carey he would get back to him, but a couple of weeks went by. Soon after, Fox made an official offer, which was submitted to Time Warner's board of directors.

Fox's proposal was to acquire all outstanding shares of Time Warner for a combination of 1.53 shares of Fox's non-voting common shares and $32.42 in cash per share. Some analysts say Fox would need to increase the cash component to sweeten its offer.

This month, Time Warner officially said no. The company said its board had determined that "it was not in the best interests of Time Warner or its stockholders to accept the proposal or to pursue any discussions with 21st Century Fox."

Time Warner also questioned whether Fox's management was up to the task of running two enormous companies. Investors have, in the past, been concerned about succession plans at Fox. The news drove down shares of Fox's stock 6% to $33 a share.

Carey's current contract runs through 2016, and Murdoch has made it clear that he wants his two sons — James and Lachlan — to manage his empire when he is gone. But many investors and analysts feel the younger Murdochs, who are in their 40s, are unproven.

If Murdoch can pull off the acquisition, it would establish Fox as the world's premier media company. It would also mark a remarkable comeback for the billionaire and his family after a phone hacking scandal at his British tabloids badly tarnished the Murdoch name. Three years ago the company was reeling amid revelations that journalists at the News of the World tabloid had eavesdropped on the cellphone conversations of British celebrities, sports stars, members of the Royal Family and even crime victims.

Murdoch himself was hauled before a committee of the British Parliament, calling his appearance "the most humble day of my life."

Talk of Time Warner being a potential acquisition target has heated up in recent months as it shed assets to focus on movies and TV. Last month, it completed a spinoff of its Time Inc. publishing unit, which was seen as a drag on the company. It previously separated from America Online and Time Warner Cable.

"The deal makes strategic sense; the question is what price do you pay?" said Christopher Marangi, a portfolio manager with Mario Gabelli's GAMCO Investors, which has a stake in both companies. "There is a price at which Time Warner would sell."

Investors said Wednesday that if Murdoch is not successful, another company, perhaps Google Inc., Apple or Amazon or even cable mogul John Malone, could make a run at Time Warner. One analyst said that Time Warner could make a bid to some other large company to bulk up, perhaps try to buy Netflix.

But others downplayed such a move, saying that Time Warner is a disciplined company.

Fox is known for being aggressive. In 2007, Murdoch bought Dow Jones & Co. because the newspaper baron wanted to add the prestigious Wall Street Journal to his portfolio.

Murdoch didn't care that his $5.6-billion bid for Dow Jones was viewed as wildly overpriced — he simply wanted the Journal to bring respectability to his newspaper group.

Some people anticipate a replay of Murdoch's pursuit of Dow Jones in the bid for Time Warner.

"Murdoch and Chase Carey and their team have been thinking about this for a long time," Marangi said. "They've gamed it out and they don't make these decisions haphazardly."